Mixed signal: Charity reporting when donations signal generosity and income Bracha A. and Verstelund L.

Classical view New approach Social status Donations Public recognition Income status Social status Donations Generosity status New approach Income status Generosity status One among various reasons why people donate or participate in charity is social status; which could be acquired through public recognition, meaning the public announcement on his contribution. Social status is important in the way that it helps people get to a higher rank within their social network. Within the context of this paper the author discussed two essential types of status that people desire when making donation which are income status (which can be reflected in financial strength, skills and ability) and generosity status (as in most cases people want to be recognized by the society as being generous). According to old schooled thoughts, there is a positive correlation between the amount of donation and social status, meaning larger donation reflects higher social status and higher status is the incentive that promotes more donation, whether it is income status or generosity status. Vice versa for the case of lower donation. Nonetheless, it was argued by the author that this theory only looks at social status as single attribute, either income status or generosity status. In reality, social status in multidimentional and one must analyze the effect combination of both types of status. In which case, high donation does not always associate with higher social status. Donations Hypothesis: High donations does not always associate with high income and generosity status

Experiment Stage 1: Participants are divided into various groups Participants earn income based on their performance in solving Math problems Stage 2: Participants make donation Information within each group is controlled: Visible Donation Nonvisible Donation Information within each group is controlled whether each member’s amount of donation is made visible to other members or not and whether member’s individual income is made visible to the whole group or not. Therefore each particular group would fall within one among the four combinations as illustrated. Visible Income (VI; VD) (VI; ND) Nonvisible Income (NI; VD) (NI; VD)

Donation Status Low performers High performers Case #1: Nonvisible Donation Nonvisible Income  Visible Income Low performers High performers Associate with low income status Donation decreased Associate with high income status Donation increased Given donation nonvisible, by making the information on personal income become visible, Low performers with low income status tend to decrease their donation amount while high performers with high income status tend to increase their donation. This proves that there is indeed a relationship between income status and donation. In the case of nonvisible Donation, no Generosity is observed and therefore the behavior is consistent with the classical view: Low status means low donation and high status means high donation. Donation Status

Low performers High performers Case #2: Visible Donation Nonvisible Income  Visible Income Low performers High performers Associate with low income status Donation increased Associate with high income status Donation could either increase or decrease When donation is made visible, it means Generosity status is observed and taken into consideration when participants make decision. In contrast to the first result, under the influence of both Income status and Generosity status, low performers tend to increase their donation. This is due to a key assumption on participants behavior that People prefer to be perceived as poor and generous rather than rich and stingy. As being associated with low income status, low performers increases their donation instead of decrease in order to gain higher generosity status. The opposite effects of income status and generosity status on the amount of donation from low performers stays consistent with the new approach by the authors. For High performers, there are two types of actions could be made. As being associated with high status of income, their contribution would be valued less (e.g. one eur donated by poor people is praised more than one eur donated by the rich) therefore it discourages high performers leading to lower donation. However, high performers could also donate even more to improve their generosity status. People prefer to be perceived as poor-and-generous rather than rich-and-stingy

Low performers Case #3: Nonvisible Income Nonvisible Donation  Visible Donation Low performers Income status is hidden Donation decreased Signaling In the last case only information on donation is made visible. In this case the author focus on the behavior of the Low performers. As they earn low income so there is a limited amount of money that they could donate. Even when they People prefer to be perceived as poor-and-generous rather than rich-and-stingy